The major Bitcoin problems
Bitcoins is definitely a revolutionary technology that is changing the world, however, this technology is not perfect. There are several problems that occur when using it. One of the most popular Bitcoin problems can make mainstream adoption difficult or make it impossible at all. Today, we are going to discuss the main problems that you may face when using Bitcoin and how to improve your experience when using the technology.
Bitcoin is complicated
Bitcoin is digital and very technical, therefore, not many people can understand it clear. The majority of people especially older generation cannot understand how it is not possible to hold Bitcoin in a hand. Also, they do not understand where Bitcoin comes from if not from a bank or a company. To engage in Bitcoin, you need a computer or a device. This is why a lot of people think that Bitcoin is a fraud as long as the explanation can only be technical. The non-technical explanation does not make sense for a lot of people.
Unfortunately, technical difficulties of Bitcoin cannot be simplified in the nearest time, however, the community applies as many efforts as possible to clarify myths about the network and the cryptocurrency. There are already few videos that give a clear explanation. Review Bitcoin101 or Bitcoin Stach Exchange and many other videos. Third party services and business were created for making Bitcoin use simpler, such as online wallet Coinbase.
Bitcoin system requires people to have knowledge of computer security
In general, one file of Bitcoin user’s computer is a key to access all user’s bitcoins. If this file – a wallet is lost or stolen, all user’s bitcoins cannot be returned. Also, Bitcoin has quite unique terms such as encrypted wallets, cold storage or BIP0038. For newcomers, these words do not make sense and complicate their lives.
A lot of online wallets and businesses were created to offload the security requirements from users. People can store their bitcoins with the help of a service and to avoid having to secure and backup their own Bitcoin wallets. However, using such services still needs a basic understanding of computer security, for example, using safe passwords and two-factor authentication to prevent unauthorized account access. Also, these private sector services are constantly targeted by attackers, and some have been successfully hacked and had user deposited bitcoins stolen. The main problem of all these services is trust. If you deposit bitcoins by someone else, you have to trust them to keep your funds safe. Unfortunately, there were a lot of cases when operators of services run away with depositors’ bitcoins.
Bitcoin is slow for retail payments
After a new transaction is broadcast to the Bitcoin network is it usually displayed for a user within a few seconds. However, in some cases, a transaction can take up to a few minutes. To make a payment travel across the network and reach the connection with a sender, it can cause a seller and a buyer to wait.
Also, if a seller does not agree to wait up to an hour to make a transaction confirmed, selling physical and digital items will be under the risk of double-spend attacks. An evil buyer could send two conflicting transactions using the same bitcoins at the same time: one to pay the seller, and a second one to pay themselves. The seller can see the first transaction and review it as a paid order without waiting for a confirmation and allow the buyer to leave with the item. After the second transaction will finally be confirmed in a block chain that invalidating the first transaction. In such case, the seller is the victim of a theft.
The current solution for such case is for merchants to use a third party Bitcoin payment service provider like bitpay.com to handle transaction processing. The service Bitpay excludes all double-spend risks for seller and claims that it experienced zero cases of payment fraud. However, it is not very clear how this very service mitigates double traffic attacks. Bitcoin payment service is excellently connected to the Bitcoin network through a lot of nodes around the world which help to define double spend attacks.
Bitcoin has no built-in consumer protection
Companies with credit cards as well as companies that handle payments like PayPal can protect buyers from the scam sellers using chargebacks. If a consumer makes a purchase using the payment processor and can show that the payment was ripped off by an untrustworthy seller, the company that process all payments will have to return the money.
Bitcoin does not provide such protection. All transactions are irreversible, so the buyer has to trust the seller. A lot of Bitcoin users say that this is a feature and you have to be careful before you send anyone money. Also, irreversible payments protect sellers from fraud chargebacks.
Bitcoin had technical shortcomings
Such attacks as Sybil that take 51% and display a denial of service are not capable to break bitcoin, however, they can disrupt nodes work for some time or allow transactions with double traffic. Pulling off organized attacks on a large scale needs a lot of expensive computing power and becomes increasingly improbable because more honest nodes and miners join the network. At the moment, there are no breaks or double spend due to such types of attacks.
Is Bitcoin for everyone?
Bitcoin was designed to be trustless. You do not need to trust a central authority to create, spread, and manage your money. The side effect is Bitcoin needs more responsibility from a user to be more aware of its features and safe usage. So, Bitcoin is a completely new and complicated idea, and for a lot of people, a lot of time needed to understand this very technology.
However, to have a lot of knowledge of the network is not very needed. You can trust third parties to deal with more technical and complicated responsibilities. A lot of people prefer to use PayPal, the services of bank transfer or banks to transmit their money. New businesses create such infrastructure for fixing some of the above-mentioned problems and to make Bitcoin more easy and clear for most people.
If you use one of those services, you have to make sure that it has got a secure reputation. You have to find out where the service is located, whether they post their physical address or they work anonymously, what people say about the service on different forums.
Bitcoin is still a new technology and it is still considered an experiment. People who do not like the problems that we discuss in this article and do not want to deal with them, should not use the network to avoid complications and misunderstandings.